Correlation Between PayPal Holdings and SMA Solar

Can any of the company-specific risk be diversified away by investing in both PayPal Holdings and SMA Solar at the same time? Although using a correlation coefficient on its own may not help to predict future stock returns, this module helps to understand the diversifiable risk of combining PayPal Holdings and SMA Solar into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between PayPal Holdings and SMA Solar Technology, you can compare the effects of market volatilities on PayPal Holdings and SMA Solar and check how they will diversify away market risk if combined in the same portfolio for a given time horizon. You can also utilize pair trading strategies of matching a long position in PayPal Holdings with a short position of SMA Solar. Check out your portfolio center. Please also check ongoing floating volatility patterns of PayPal Holdings and SMA Solar.

Diversification Opportunities for PayPal Holdings and SMA Solar

0.34

Correlation Coefficient

PayPal Holdings  SMA Solar

Weak diversification

The 3 months correlation between PayPal and SMA is 0.34. Overlapping area represents the amount of risk that can be diversified away by holding PayPal Holdings and SMA Solar Technology in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on SMA Solar Technology and PayPal Holdings is a relative statistical measure of the degree to which these equity instruments tend to move together. The correlation coefficient measures the extent to which returns on PayPal Holdings are associated (or correlated) with SMA Solar. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of SMA Solar Technology has no effect on the direction of PayPal Holdings i.e., PayPal Holdings and SMA Solar go up and down completely randomly.

Pair Corralation between PayPal Holdings and SMA Solar

Given the investment horizon of 90 days PayPal Holdings is expected to under-perform the SMA Solar. In addition to that, PayPal Holdings is 1.6 times more volatile than SMA Solar Technology. It trades about -0.41 of its total potential returns per unit of risk. SMA Solar Technology is currently generating about 0.22 per unit of volatility. If you would invest  1,288  in SMA Solar Technology on December 5, 2024 and sell it today you would earn a total of  116.00  from holding SMA Solar Technology or generate 9.01% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Very Weak
Accuracy	100.0%
Values	Daily Returns

PayPal Holdings  vs.  SMA Solar Technology

PayPal Holdings

Risk-Adjusted Performance

Very Weak

Over the last 90 days PayPal Holdings has generated negative risk-adjusted returns adding no value to investors with long positions. Despite inconsistent performance in the last few months, the Stock's basic indicators remain quite persistent which may send shares a bit higher in April 2025. The latest mess may also be a sign of long-standing up-swing for the company institutional investors.

SMA Solar Technology

Risk-Adjusted Performance

Very Weak

Over the last 90 days SMA Solar Technology has generated negative risk-adjusted returns adding no value to investors with long positions. Despite nearly stable technical and fundamental indicators, SMA Solar is not utilizing all of its potentials. The current stock price disturbance, may contribute to mid-run losses for the stockholders.

Pair Trading with PayPal Holdings and SMA Solar

The main advantage of trading using opposite PayPal Holdings and SMA Solar positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if PayPal Holdings position performs unexpectedly, SMA Solar can make up some of the losses. Pair trading also minimizes risk from directional movements in the market. For example, if an entire industry or sector drops because of unexpected headlines, the short position in SMA Solar will offset losses from the drop in SMA Solar's long position.

The idea behind PayPal Holdings and SMA Solar Technology pairs trading is to make the combined position market-neutral, meaning the overall market's direction will not affect its win or loss (or potential downside or upside). This can be achieved by designing a pairs trade with two highly correlated stocks or equities that operate in a similar space or sector, making it possible to obtain profits through simple and relatively low-risk investment.

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Note that this page's information should be used as a complementary analysis to find the right mix of equity instruments to add to your existing portfolios or create a brand new portfolio. You can also try the Equity Analysis module to research over 250,000 global equities including funds, stocks and ETFs to find investment opportunities.